Zuma and business: damp squibs both – Politicsweb, 15 February 2016

John Kane-Berman says President offered little in way of meaningful economic reform in his SONA.

By John Kane-Berman

President Jacob Zuma got one thing absolutely right in his state-of-the-nation address last week. Avoiding downgrade of South Africa's investment rating to junk status necessitated "doing things differently". But he said little to suggest that his government really intended to do anything very different. Even though Mr Zuma said it was "important to act decisively to remove domestic constraints to growth" and so enable the economy to grow faster, the speech contained no sign of any such decisive action. Quite the opposite, in fact.

In addition to all the well-known constraints upon growth, two new ones are in the pipeline. One is the Regulation of Land Holdings Bill, which imposes ceilings on ownership of farm land and prohibits foreigners from owning land. This will undermine investment in agriculture, but Mr Zuma announced that it would soon go to the Cabinet.

Also in the pipeline - though he did not refer to it - is a new Expropriation Bill, which will greatly extend the state's powers of expropriation. A promise not to sign this bill, which is currently winding its way through Parliament, would have done far more to rescue South Africa's reputation as an investment destination than such gimmicks as the "One-stop Shop/Invest South Africa" initiative" of which Mr Zuma spoke.

Reiterated commitment to retaining black economic empowerment as a "key part of all programmes of government" also contradicts the commitment to removing constraints upon growth. As for costly and troubled state-owned companies, the only concrete thing Mr Zuma had to announce was the establishment of a new one: Ketlaphela, a state-owned pharmaceutical company to supply antiretrovirals to the Department of Health.

Why this cannot be left to the private sector he did not explain. But perhaps he gave a hostage to fortune when he said that state-owned companies "no longer relevant to our development agenda will be phased out". It will take a lot of ingenuity to explain how South African Airways is relevant to this agenda.

Referring to his meetings with business, including the "high-level" one on the Tuesday before he gave his address, Mr Zuma said he'd heard from them how to "put the economy back on a growth path". But if anything was a damper squib than Mr Zuma's own speech, it was the suggestions emanating from that meeting.

Apart from endorsing tax increases, the eight-point plan supposedly drawn up by the country's top chief executives spoke about cohesive narratives, over-delivery on fiscal consolidation, more effective management of state-owned enterprises, accelerated private-public partnerships, a review of how legislation is implemented, ensuring that labour law contributes to inclusive growth, and setting up an anti-corruption committee.

This may or may not impress international credit ratings agencies, but it falls far short of what is needed to accelerate South Africa's growth rate. And if that's the best that business can come up with, it's little wonder that Mr Zuma doesn't do much better.

* John Kane-Berman is a policy fellow at the South African Institute of Race Relations, a think-tank promoting political and economic freedom.